Fountain Valley school bond election committee fined $5,000

The state's political watchdog on Thursday fined a Fountain Valley school bond campaign committee $5,000 for failing to report who gave it money before last year's bond election.

The committee was guided by the political staff of George K. Baum & Co., a Kansas City investment bank the school district had hired to help it pass the $23.5 million bond measure. Voters defeated the measure.

The state's Fair Political Practices Commission said the committee failed to file two legally-required reports by Election Day. The reports would have revealed that the group had received tens of thousands of dollars in donations, including a $10,000 check from Baum. The bank stood to be paid more than $250,000 in fees if the measure passed, according to its agreement with the school district.

The committee has still not reported that the bank provided it with political services valued at $13,000. The bank recently reported that contribution to state officials.

Marc Ecker, the district's superintendent, and Paul Rincon, a parent who volunteered as the campaign's treasurer, said the failure to file the reports was an unintentional oversight by volunteers who had never before worked on a political campaign.

Rincon said he wished he would have received better advice from the bank's political experts.

"For $13,000 for a month-and-a-half of work, I would have thought they would have given us a little more help," he said.

Executives from George K. Baum declined to comment.

It is illegal for school districts to use public money to hire political consultants for a bond election. But Baum has done similar political work for dozens of California schools in recent years.

The Fountain Valley school board had agreed before the election that Baum would get the exclusive right to underwrite all the bonds for a fee of 1.1 percent of the principal. That amount was almost twice the national average that schools last year paid banks to underwrite debt, according to the Bond Buyer.

The bank had agreed that the school would pay nothing if the measure failed.

California treasurer Bill Locker asked the state attorney general in March to investigate whether districts are breaking the law through agreements like those written by Baum.

After the Register wrote in February about Baum's failure to report the value of its political consulting in numerous school bond campaigns, its executives filed reports with the California Secretary of State to make the disclosures. Included in those reports filed in April was its donation of more than $13,000 in political services to the Fountain Valley campaign.

Rincon said the bank advised him in April to disclose the donated political services. He said he explained the donation in a letter to the Fair Political Practices Commission and asked for advice on what to do. The amount has not yet been included in the committee's reports filed with the county Registrar of Voters, which are available for public review.

Ecker said the district hired Baum because officials had never tried to pass a bond measure before and needed advice from experts.

"We didn't even know that we needed a committee, quite frankly," he said.

Ecker said he did not know that agreements like the one the district signed with Baum appear to skirt the law.

The ballot measure proposed that the district sell the bonds to pay for computers and other technology. Taxpayers would have paid for the debt over 25 years, although computers have a life of only four to five years. The bank had advised the school to create an endowment fund with the money so that the computers could be replaced as needed over the years.

Ecker said the district needed the computers to implement the new educational standards known as Common Core. The standards require that computers be used for testing and evaluation. Ecker said he wanted the district's students to have access to the same technology as those attending other schools.

John W. Briscoe, a member of the Fountain Valley Republican Assembly, filed a complaint with the state about the missing financial disclosure reports the day before the November election. Briscoe had helped lead the opposition to the school bond measure, including questioning why long-term debt should be used to purchase computers with short life spans.

In his complaint, Briscoe also noted that the campaign committee failed to report in-kind donations from Star Real Estate, which had allowed volunteers to use its phone bank to ask residents to vote for the measure. Rincon said he didn't know that such non-cash contributions had to be reported.

Sandra Crandall, who is now the school board's president, was the only member to vote against putting the measure on the ballot. She had been so concerned that the committee had not filed the proper reports that she visited the county Registrar of Voters the day before the election to try to locate the filings.

Crandall explained earlier this year that the bank had provided school officials with a thick spiral notebook about six months before the election, proposing that it help the district pass a bond measure to pay for computers. She said at least one bank executive had attended the phone banks at Star Realty to help organize the volunteers. The bank also performed a survey of households.

"They certainly shepherded the process along," she said.

Ecker said he would like to try again to get a bond measure passed. He said he would consider hiring Baum again. "They did a really good job with us – provided us with the services we anticipated," he said.